Novartis Challenges USPTO's Interim Procedure for Requesting PTA Recalculations

    By Donald Zuhn --

Last week, Novartis AG and Novartis Vaccines and Diagnostics, Inc. filed a complaint against U.S. Patent and Trademark Office Director David Kappos, seeking review of the Office's patent term adjustment (PTA) determinations for eleven Novartis patents (see "Court Report," July 11, 2010).  The eleven patents specified in the complaint are U.S. Patent Nos. 6,656,957, issued December 2, 2003; 6,878,721, issued April 12, 2005; 7,098,325, issued August 29, 2006; 7,112,673, issued September 26, 2006; 7,265,089, issued September 4, 2007; 7,348,353, issued March 25, 2008; 7,423,148, issued September 9, 2008; 7,470,709, issued December 30, 2008; 7,470,792, issued December 30, 2008; 7,534,890, issued May 19, 2009; and 7,576,221, issued August 18, 2009.

In its complaint, Novartis asserts that "[the Director] consistently calculated PTA for utility patent applications filed at least as early as May 29, 2000 that resulted in issued patents at least as late as March 1, 2010 in a manner that incorrectly determined the overlap of A Delay [i.e., one-day extension of patent term for every day that issuance of a patent is delayed by a failure of the USPTO to comply with various enumerated statutory deadlines; see § 154(b)(1)(A)] and B Delay [i.e., one-day extension of patent term for every day greater than three years after the filing date that it takes a patent to issue; see § 154(b)(1)(B)]."  Novartis also asserts that "[the Director] had improperly contended that the period of B Delay began to accrue from the filing date of the patent application, rather than from three years after the filing date of the patent application," and therefore, "had considered the overlap of A Delay and B Delay to include any period of A Delay within the first three years after filing a patent application."  As a result, "[the Director's] policy and practice in calculating PTO delay was to grant PTA amounting to the greater of A Delay or B Delay," which Novartis contends deprived it of patent term to which it was entitled under § 154(b).

Following the Federal Circuit's decision in Wyeth v. Kappos, in which the appellate court determined that "[s]ection 154(b)'s language is clear, unambiguous, and intolerant of the PTO's suggested interpretation," and thus, "accord[ed] no deference to the PTO’s greater-of-A-or-B rubric," the USPTO announced that it would not seek further review of the Wyeth decision (see "USPTO and DOJ Will Not Seek Review of Wyeth v. Kappos").  One week later, the USPTO announced interim procedures for patentees to request PTA recalculation in light of Wyeth (see "USPTO Announces Interim Procedure for Requesting PTA Recalculations").  Novartis notes that "[t]hese interim procedures included an expedited, informal procedure for seeking recalculation of PTA solely on the basis of Wyeth, but extended that remedy only to patents issued on or after September 2, 2009."  (In contrast with Novartis' recitation of a September 2, 2009 cutoff, the Office stated in a Federal Register notice published on February 1, 2010 that it would "deny as untimely any request for recalculation of patent term adjustment indicated on a patent that is not filed within 180 days of the day the patent was granted."  Thus, according to our calculations, the interim procedure for requesting PTA recalculation applied to patents that issued after August 5, 2009 -- i.e., on or after Tuesday, August 11, 2009 -- rather than September 2, 2009 as indicated in Novartis' complaint.).

Regardless of the correct cutoff date, Novartis' action is unique in that it is the first to question the Office's interim procedures for requesting PTA recalculation in light of Wyeth.  In its complaint, Novartis contends that "[the Director's] refusal to accord the benefits of Wyeth to [applications filed by May 29, 2000 and issued on or before September 1, 2009] is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law and in excess of statutory jurisdiction, authority or limitation."  Arguing that each of the eleven patents at issue was filed on or after May 29, 2000 and issued on or before September 1, 2009, Novartis asserts that it was deprived of patent term on each patent under Wyeth and that it was precluded from recapturing this patent term under the Office's interim procedure.

With respect to the timeliness of its complaint, Novartis argues that the complaint complies with the filing requirements of 35 U.S.C. § 154(b)(4)(A), or alternatively, is timely under the doctrine of equitable tolling or the discovery rule.  Section 154(b)(4)(A) specifies that that "[a]n applicant dissatisfied with a [PTA] determination made by the Director . . . shall have remedy by a civil action against the Director filed in the United States District Court for the District of Columbia within 180 days after the grant of the patent."  Thus, for the patents specified in Novartis' complaint, compliance with § 154(b)(4)(A) would have (seemingly) required Novartis to bring suit against the Director by the following dates:

US 6,656,957 -- May 30, 2004
US 6,878,721 -- October 9, 2005
US 7,098,325 -- February 25, 2007
US 7,112,673 -- March 25, 2007
US 7,265,089 -- March 2, 2008
US 7,348,353 -- September 21, 2008
US 7,423,148 -- March 8, 2009
US 7,470,709 -- June 28, 2009
US 7,470,792 -- June 28, 2009
US 7,534,890 -- November 15, 2009
US 7,576,221 -- February 14, 2010

Because Novartis filed its complaint on July 6, 2010, it would appear that the complaint did not comply with § 154(b)(4)(A).  However, Novartis argues that "§ 154(b)(4)(A) applies to a re-determination of PTA by [the Director] under 'paragraph (3),' i.e., 35 U.S.C. § 154(b)(3)," and that "§ 154(b)(3), by its plain terms, governs a PTA determination by [the Director] only in conjunction with a notice of allowance of a patent application," and "does not cover a PTA determination by [the Director] in conjunction with the issuance of a patent."  As a result, Novartis argues that the 180 day time limit is inapplicable to its claim.

Novartis also points to two other ways in which its complaint should be considered timely:  pursuant to the doctrine of equitable tolling or the discovery rule.  In February 2009, we discussed a case in which a patentee tried the first approach (see "More § 154(b)(4)(A) Actions Filed against Director").  In that case, General Hospital Corp. filed a complaint against the Director on January 16, 2009, requesting correction of a PTA determination with respect to U.S. Patent No. 7,367,341, which issued on May 6, 2008.  For a patent issuing on that date, a complaint should have been filed by November 2, 2008.  Thus, General Hospital missed the deadline for filing its complaint by 76 days.  Nevertheless, General Hospital contended in its complaint that "[the District Court for the District of Columbia's] decision in Wyeth v. Dudas constituted a change in the law sufficient to invoke the doctrine of equitable tolling to allow for the filing of this complaint at this time."  The doctrine of equitable tolling preserves a plaintiff's claims when strict application of the statute of limitations would be inequitable. A check of PACER shows that the District Court stayed General Hospital's case on March 30, 2009, pending the outcome of the Wyeth appeal, and that General Hospital voluntarily dismissed the action on April 29, 2010.  As a result, the District Court never addressed the question of whether the doctrine of equitable tolling could be used to bypass the filing deadline set forth in § 154(b)(4)(A).  In the instant case, Novartis contends that it "lacked knowledge and adequate notice of its claim . . . until [the Director's] announcement that the PTO would not appeal the Wyeth decision or, at the earliest, the date of the decision itself."

Novartis also contends that its complaint is timely in view of the discovery rule.  Under the discovery rule, the statue of limitations specified in § 154(b)(4)(A) would not begin to run until the plaintiff "discovered" the harm.  With respect to PTA determinations based on Wyeth B-delay, the harm would have been "discovered" (at the earliest) on January 7, 2010, when the Federal Circuit decided Wyeth v. Kappos, i.e., on July 6, 2010.

In addition to seeking additional patent term under § 154(b)(4)(A) (count 1), the doctrine of equitable tolling (count 2), and the discovery rule (count 3), Novartis also adds a fourth count alleging that "[the Director's] purposeful and deliberate diminution of the patent term of each of the Novartis Patents constitutes a taking of Novartis' property without just compensation, in violation of the Fifth Amendment of the Constitution of the United States," and a fifth count alleging a violation of the Administrative Procedures Act (i.e., that the USPTO's PTA determinations were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law within the meaning of 5 U.S.C. § 706(2)(A); contrary to Novartis' constitutional rights within the meaning of 5 U.S.C. § 706(2)(B); and in excess of statutory authority within the meaning of 5 U.S.C. § 706(2)(C)").

Comments

[6]

So then, let's be clear. These guys are saying that since they couldn't be bothered to bring a suit like Wyeth against the PTO in the first place they now deserve to get their patent terms recalculated even though the law specifically gives them a time period (now expired) to do that?

Mhmm. Somehow I don't see this going very far. The director should have saved himself some trouble and further appealed the Wyeth case itself and had it properly disposed of rather than giving up.

[elfvu]

6, do you actually have a law degree?

[6]

"6, do you actually have a law degree?"

I do not "actually" have a law degree and I also don't have one. I'm not 100% sure if I should bother to get one either. They cost as much as a nice house.

[General Admission]

I tend to agree with 6 that this will be a tough argument to win.

I think this core issue may have been brought up at a PPAC meeting shortly after the interim procedure was announced (ie., why not open up the interim procedure to any issued, post May 29, 2000 filed application). I think they tried to stick to some deadline that related to the statutory 180 day bar date for filing suit.

The real issue for me is for the folks that had filed a petition and had it denied or dismissed by the PTO prior to either the Wyeth Dist.Ct. for D.C. or the Fed.Cir. decisions. I wonder if there's an argument to be made that filing a district court case would have been too costly...

While PTA petitions were typically held in abeyance pending the F.C. Appeal, the REAL tough decision was whether to file suit (and absorb associated costs) by the 180th day or to elect to hold out for favorable decision on the petition (having invested your $200 fee, plus atty fees). A risk/reward calculation, but one that should have been discussed between client/atty.

[Kevin E. Noonan]

I think the argument is simple: does a patentee have a duty to challenge the PTO's interpretation of a statute that a court (the CAFC) finds to be contrary to the plain meaning of the statutory language? Typically, when a court makes a final determination of what a statute means, the application of the statute using the court's post hoc interpretation is retroactive - see the posts on Sherry Knowles arguments regarding this aspect of judicial interpretation.

Here, the CAFC found in Wyeth that the PTO's interpretation and implementation of the statute was incorrect, i.e., contrary to how the law was written (and it wasn't even close: the district court opinion at least conceded that the PTO's interpretation was reasonable; the CAFC thought it was clearly contrary to the plain meaning of the statute). So under these circumstances, why should Novartis, or any patentee who had their PTA improperly calculated, now be foreclosed from redress because the PTO once again promulgated a rule that says so? It is clear that this was, once again, a PTO interpretation of the statute. Why should we give the Office any more deference in how they interpret this part of the statute than the court did with regard to their interpretation of the A-delay/B-delay part of the same statute?

[elfvu]

I thought so.

[6]

"So under these circumstances, why should Novartis, or any patentee who had their PTA improperly calculated, now be foreclosed from redress because the PTO once again promulgated a rule that says so? "

I think I covered this in my first post. Because the law says so. Or at least that's what your first post seems to blatantly say.

Despite what the law says, they're attempting to rely on equity, but I'm pretty sure that bringing suit 3 years after the deed was done is not in accordance with the principles of equity.

According to the maxims of equity

http://en.wikipedia.org/wiki/Maxims_of_equity

Equity aids the vigilant, not those who slumber on their rights.

And while it can be argued that these folks simply did not know that they were wronged until Wyeth concluded that is a bit of a falsity. Either they believe in the office's old interpretation or the new one. If they believe in the old one then they have no case or controversy. If they believe in the new one (which was well known even before Wyeth) then they should have known they were wronged the day their PTA issued the first time.

The only thing they can argue is that they now have changed their minds about how the statute is to be interpreted many years after the fact. Equity simply cannot avail there.

And that goes double since the law has in this case intended to enact an injustice (at least to those aggrieved it is an injustice, to the rest of us it is simply a statute o limitations type o deal).

BTW Kev, this:

"I think the argument is simple: does a patentee have a duty to challenge the PTO's interpretation of a statute that a court (the CAFC) finds to be contrary to the plain meaning of the statutory language? "

Is a question, not an argument. And in any event, the answer is yes.

"Typically, when a court makes a final determination of what a statute means, the application of the statute using the court's post hoc interpretation is retroactive - see the posts on Sherry Knowles arguments regarding this aspect of judicial interpretation."

That doesn't seem to matter since the application of that ruling requires a recalculation, and there is another law that governs that. The retroactive application of the court's interpration of the law doesn't affect that other law.

"Why should we give the Office any more deference in how they interpret this part of the statute than the court did with regard to their interpretation of the A-delay/B-delay part of the same statute?"

Because the interpretation of this part of the statute is completely straightforward?

http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_154.htm

"(3) PROCEDURES FOR PATENT TERM ADJUSTMENT DETERMINATION.-

(A) The Director shall prescribe regulations establishing procedures for the application for and determination of patent term adjustments under this subsection.

(B) Under the procedures established under subparagraph (A), the Director shall-

(i) make a determination of the period of any patent term adjustment under this subsection, and shall transmit a notice of that determination with the written notice of allowance of the application under section 151; and

(ii) provide the applicant one opportunity to request reconsideration of any patent term adjustment determination made by the Director.

(C) The Director shall reinstate all or part of the cumulative period of time of an adjustment under paragraph (2)(C) if the applicant, prior to the issuance of the patent, makes a showing that, in spite of all due care, the applicant was unable to respond within the 3-month period, but in no case shall more than three additional months for each such response beyond the original 3-month period be reinstated.

(D) The Director shall proceed to grant the patent after completion of the Director's determination of a patent term adjustment under the procedures established under this subsection, notwithstanding any appeal taken by the applicant of such determination.

(4) APPEAL OF PATENT TERM ADJUSTMENT DETERMINATION.-

(A) An applicant dissatisfied with a determination made by the Director under paragraph (3) shall have remedy by a civil action against the Director filed in the United States District Court for the District of Columbia within 180 days after the grant of the patent. "

Gl you guys, you're going to need it.

[Kevin E. Noonan]

Well, 6, that is the argument. Which is why we have judges to decide these things. Of course, at its roots your argument is "anyone dumb enough to rely on a PTO determination deserves what she gets," which seems a little harsh.

I have a question, however: why do you, or the PTO, care? I understand under Dudas the attitude was "what we say, goes," but if you don't have that bias what is the beef? It is even possible that PTA could help the Office, since in at least some cases the extra time will extend patent term past the 11.5-year date, and so another (and most expensive) maintenance fee will come due. The common wisdom is that the budgetary shortfall the Office experienced several months ago was due to the dramatic reduction in allowances under the Dudas regime. This deprived the Office of money from issue fees and maintenance fees. If the Office benefits from these fees, then the extension of a patent that has been determined to have allowable claims should not matter to the Office. But it seems to matter to you.

My guess (at least under Dudas) was that PTA was considered to be a measure of bureaucratic ineptitude, where the more PTA the less able the Office was at performing its duties effectively. I understand that, but it seems to be an extreme response to the consequences of other factors - outdated infrastructure, too few examiners, "second look" review, etc.

Thanks for the comment.

[6]

"Of course, at its roots your argument is "anyone dumb enough to rely on a PTO determination deserves what she gets," which seems a little harsh."

To be precise I would say: anyone not satisfied with a PTO determination and is dumb enough not to say something within a reasonable period of time deserves what they get". More precisely I personally would say that nobody "deserves" PTA in the first instance. The backlog is what it is and PTO delay is what it is. The PTA adjustment is nothing but a relic of the congress shirking its responsibilities.

"why do you, or the PTO, care?"

As explained in the previous Wyeth thread, we really don't, except maybe for some higher up person who nobody save perhaps the director cares about. Oh and save for the time and effort it will take to recalculate years and years (millions?) of patent terms. That sht ain't free ya know.

I suppose an ancilliary concern might be that the public has a right to consider the PTA date set in stone after 180 days as per the statute and might have to keep readjusting their licensing agreements, renegotiating, etc. The PTO, as a member of a responsible government should care about that a little I suppose.

You could also say that my personal interest is an purely intellectual one. I like considering cases involving equitable considerations. Equity is, on the whole, imo, is much closer to justice than our laws are.

"My guess (at least under Dudas) was that PTA was considered to be a measure of bureaucratic ineptitude"

I don't know if I'd say necessarily ineptitude, though that is somewhat involved. More like inefficiency as that is the lion's share of PTA generators.

"I understand that, but it seems to be an extreme response to the consequences of other factors - outdated infrastructure, too few examiners, "second look" review, etc."

You're right there, it is a relic of congress not providing a fully funded (even over-funded) PTO as well as putting someone in place that would recognizing what the office actually needs. Specifically, internal processes that put an emphasis on substance rather than formalities etc, as well as actual management.

[Term Junkie]

"Because the interpretation of this part of the statute is completely straightforward?"

Are you sure, 6?

1) § 154(b)(4) refers to (3), which deals with pre-grant activity (e.g., notice of allowance PTA, Director proceeding to grant despite an "appeal" having been taken [hmm....note that past tense is used here, does "appeal" refer to the "remedy" under § 154(b)(4)(A) or the "opportunity" under § 154(b)(3)(B)(ii)], but no post-grant activity.

2) 154(b)(4)(A) refers to an "applicant". All of § 154 uses "applicant" to refer to a patent applicant. If 154(b)(4)(A) meant to limit a patentee to 180 days - why doesn't it refer to a patentee?

§ 154(b)(4)(A)seems fishy to me.

[Kevin E. Noonan]

6, all kidding aside, that is the best post I've ever read from you.

Thanks.